News: Cyprus 'stable' as Euro day looms

Tue, 20 Nov 07

Investors are keeping an eagle eye on Cyprus as Euro adoption grows closer...

Investors in property looking to secure a piece of real estate in Cyprus, whether as a retirement home or as a buy-to-let property to serve the army of tourists who descend on the sun-blessed Mediterranean island every year, will have been keeping an eye on the economy.

The news is good for Cyprus, which is just as well because it is less than two months from a key moment in its economic and political history, when, unlike Britain, it ditches the pound and adopts the Euro on New Year's Day 2008. Such a move, of course, is generally regarded as a means of ensuring solidity and stability, as the country ties itself in irrevocably to the continental economy.

Exceeding expectations

Like any country planning to enter the Euro, Cyprus has had some book balancing to do and has now announced to the world that it has succeeded very well. Finance minister Michael Sarris told reporters: ''We have managed to exceed our expectations and balance public finances, with the result of a small surplus in 2007.

"Our forecast is for a surplus of about 1.5 percent of gross domestic product. It could be more or less, but approximately the figure will be about there,'' the Financial Mirror reported him as saying.

In addition, he said, public debt is falling, while economic growth is expected to remain a very healthy 4.3 per cent in 2008, although the fairly high inflation rate meant tax cuts would have to be ruled out.

Thus those looking to Cyprus as a possible investment destination appear set to find before them an island enjoying a strong economy as well as the extra economic stability of Eurozone membership. What is also the case is that real estate is a major part of the economy and the main source of foreign investment in Cyprus.

Property an ‘economic mainstay’

This point was made economist Dr Stelios Platis, who told the Cyprus Mail that the industry had now overtaken tourism as the mainstay of the economy, accounting for 20 per cent compared with 17 per cent for holidaymakers.

He stated that Cypriots themselves were not only culturally driven to be homeowners themselves, but this made economic sense in the current property market climate in the country, saying: "The returns are healthy so it makes good business sense."

Such sense, Dr Platis noted, has been picked up on by overseas investors, noting that "as high as 20 per cent of immobile property on the island is owned by foreigners". If Cyprus continues to do as well economically, enjoys the stability of the Euro and retains its property market health, that figure may continue to rise.

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